Clarifying board expectations is a good idea

proposed guidance by the Federal Reserve on August 3, 2017 would narrow the scope of board responsibilities. It has gotten a lot of snarky reviews, with critics suggesting that it would result in the directors of the nation’s largest financial institutions having less responsibility instead of more. Critics argue that if the financial crisis taught us anything, it is that more board governance is needed, not less.

This criticism misses the point. Not only is the Federal Reserve justified in clarifying the responsibilities of board members but, keeping in mind that the views expressed in this blog are mine and mine alone, NCUA should follow the Federal Reserve’s lead and provide greater clarity to boards detailing the proper division of labor between Boards of Directors and Senior Management.

The Fed’s goal is to make sure that boards remain focused on five core responsibilities. These core responsibilities are to (1) Set clear, aligned and consistent direction; (2) Actively manage information flow and board discussions; (3) Hold senior management accountable; (4) Support the independence and stature of independent risk management and internal audit and (5) maintain a capable board composition and government structure.

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